Repatriation refers to the return of people, money, or objects of cultural heritage to their country or culture of origin.
In finance, repatriation typically means converting foreign currency into one’s home currency. This often occurs when individuals return home after living or working abroad, but it also applies to business transactions, foreign investments, and international travel. Repatriating currency can bring certain risks, including foreign exchange risks.
Repatriation extends beyond finance, including the return of refugees, diplomats, or looted cultural artifacts. Efforts have increased to repatriate cultural goods looted during colonialism or war, backed by international law and numerous court cases.
Key Takeaways
- Repatriation involves the conversion of foreign currency to local currency and the return of cultural objects and people.
- Cultural property and people’s repatriation are protected under international law.
- For corporations, financial repatriation denotes converting offshore earnings back to the company’s home currency.
- Currency repatriation entails certain risks, including potential losses from exchange rate fluctuations.
- U.S. taxpayers have historically faced taxes on repatriated money earned overseas.
Understanding Repatriation
Repatriation can encompass people, finances, or culturally valuable objects. The reasons for repatriation are just as varied.
People
Repatriation of people happens when individuals return to their home country after living, working, or visiting abroad.
A straightforward example is someone from Canada returning home after a two-year work contract in the United Kingdom. Their journey home is referred to as repatriation.
It also covers the return of refugees. For example, the 2018 agreement between Myanmar and Bangladesh to return Rohingya migrants to the Rakhine State represents refugee repatriation.
Voluntary repatriation groups have the support of their home country to reintegrate, like the U.S. Repatriation Program aiding Americans stranded abroad due to circumstances such as war or mental illness. Forced repatriation, however, may occur as seen during the Depression-era deportation of Mexican-Americans from the United States.
Cultural Property
International law safeguards cultural property, defined as any mobile or immobile item representing cultural heritage.
These laws seek to prevent the looting or pillaging of heritage sites, especially during conflicts. Key examples include the post-WWII legal frameworks, such as the 1954 Hague Convention for the Protection of Cultural Property.
National interests have increasingly adopted these protective measures. For instance, the destruction of the Bamiyan Buddhas by the Taliban in 2001 was universally condemned as a cultural crime.
Native cultural heritage has seen strengthening legal protections in some western countries. The U.S. did not standardize policies for returning Native American remains and sacred objects until the 1990s.
Financial Repatriation
Financial repatriation refers to converting capital held overseas back into the home currency. Many corporations with global operations must navigate this process.
Corporations can use various methods like share repurchasing, loans, dividend programs, and capital repayments to move funds. Similarly, individuals might repatriate funds earned or saved abroad when they return home, dependent on current exchange rates.
Some corporations delay repatriation to evade taxes. Before tax reforms, high repatriation tax rates discouraged U.S. companies from repatriating offshore earnings.
Special Considerations for Financial Repatriation
Historically, Americans faced taxes on any income repatriated from abroad. For example, U.S. corporations were subject to high repatriation taxes on foreign subsidiary earnings.
The Tax Cuts and Jobs Act (TCJA) of 2017 decreased these rates, allowing corporations to repatriate money at significantly lower transition taxes. It promised considerable tax revenue and led companies like Apple to repatriate substantial cash holdings.
Repatriation Risks for Financial Repatriation
Companies earning foreign income must handle foreign exchange risks, as currency value fluctuations can impact earnings.
For example, if Apple accumulates earnings in euros, the dollar value of these earnings changes with the exchange rate. Consequently, Apple may gain or lose significant amounts based solely on currency value changes.
Volatility in exchange rates makes foreign earnings unpredictable. Therefore, repatriated funds often support investment in technology and fixed assets.
Example of Financial Repatriation
When passing the TCJA, Apple stated it would bring home nearly all $250 billion held abroad. Consequently, Apple accepted a one-time tax payment of $38 billion to the U.S. Internal Revenue Service (IRS).
How Much Money Has Been Repatriated Since 2000?
Since 2000, billions of dollars have returned to the U.S. Major repatriations occurred in 2018 due to the TCJA, totaling about $777 billion according to the Federal Reserve.
Which Corporations Repatriate the Most Money?
Leading U.S. corporations like Apple repatriate substantial amounts. Post-TCJA, Apple committed to repatriate up to $250 billion overseas holdings.
What Is the Meaning of the Word Repatriation?
Repatriation refers to returning home from another country and covers money earned abroad or cultural objects. It’s a vital concept for both international finance operations and cultural heritage protection.
Related Terms: foreign exchange, tax revenue, tax repatriation, TCJA, foreign investments.
References
- U.S. Bureau of Educational and Cultural Affairs. “Cultural Property”.
- International Crisis Group. “The Long Haul Ahead for Myanmar’s Rohingya Refugee Crisis”, Page iii. International Crisis Group, May 2018.
- United Nations High Commissioner for Refugees. “Voluntary Repatriation”.
- Office of Human Services Emergency Preparedness and Response. “Repatriation”.
- U.S. Citizenship and Immigration Service. “INS Records for 1930s Mexican Repatriations”.
- NPR. “America’s Forgotten History of Mexican-American ‘Repatriation’”.
- International Committee of the Red Cross. “Cultural Property”.
- International Committee of the Red Cross. “1954 Convention on the Protection of Cultural Property – Factsheet”.
- International Committee of the Red Cross. “Afghanistan, Destruction of the Bamiyan Buddhas”.
- Lynne Goldstein. “International Encyclopedia of the Social & Behavioral Sciences (Second Edition)”, Pages 885-890. Elsevier, 2015.
- PwC. “The Art of Cash Repatriation”.
- U.S. Government Accountability Office. “Corporate Income Tax: Effective Rates Before and After 2017 Law Change”, Page 7.
- Tax Policy Center. “What Is the TCJA Repatriation Tax and How Does It Work?”
- Board of Governors of the Federal Reserve System. “U.S. Corporations’ Repatriation of Offshore Profits: Evidence From 2018”.
- U.S. Securities and Exchange Commission. “Form 10-K”, Page 30.
- The White House. “Economic Report of the President”, Page 50.
